Are You Ready for April 15? Here's How to File for an Extension If Not
April is here, and that means only two weeks till the federal tax filing deadline arrives. It is a lovely time of year. Spring is in the air. April showers are watering the earth. And accountants’ spouses will no longer be tax widows/widowers in just a few weeks.
Some taxpayers who have already filed and collected their returns will think, Been there, done that, as they relax by the pool sipping a lemonade. For others, it is time to run around like a chicken with its head cut off while screaming at overly complicated filing forms and cursing schedule A, B, C and E forms.
If you’re in the latter crowd of majorly stressed filers, here is what you need to know about buying some extra time and avoiding late penalties.
April 15 Is Looming
If the April 15 deadline catches you in an extreme situation this year, then there are some important steps to take. Taxpayers can file for an automatic six month extension which will postpone their filing deadline until October 15. An extension can be a wise move as it helps cancel heavy late fees. This might be wonderful news for individuals who may have found themselves in the hospital in late March or who have not yet received a Schedule K-1 with shared earnings from a business’s income.
File Later, Pay Now
The IRS expects to receive around 12 million extension forms this year. But many of those asking for a later filing date may not realize that seeking an extension delays their filing deadline but not their payment due date. In order to ask for an extension, file form 4868 by midnight on April 15and also pay the closest estimate possible of the amount you are going to owe.
While the extension form will relieve a “hefty late-filing penalty” which can reach up to 25 percent of the total amount due, it will not provide additional time in which to pay your taxes. To avoid these fees and interest, estimate how much you will owe and add a cushion of around 5 percent to protect yourself. You can then reclaim any extra payment when you do file your taxes. But if you fail to pay enough, you can not get pack any of the interest you accrued.
And even in an extreme situation where you can not pay or must take an InstaLoan to do so, “always file an extension,” recommends California CPA Andrew M. Porter.
Also remember that a federal extension does not automatically mean a state tax exemption as well.
Missing the Filing Deadline Without an Extension
If April 15 rolls around and you’re caught without filing anything, either a return or extension form, then do everything you can to file as soon as possible and make your payment. Later, you will receive a penalty notice. Contact the IRS to explain your situation. The government can be reasonable with a reasonable excuse for missing the due date. While they are unable to waive interest, they might be willing to show a grace by canceling penalties owed.
With these tips, you can sort things out before the deadline arrives and avoid some of the unnecessary drama when it comes to tax season.
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